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How to wage rate is determined?

The wage rate in a particular industry is determined by the market forces i.e. demand and supply.

The point at which the demand and supply of labour will intersect will determine the wage rate for that particular industry.

equilibrium level of employment

 

A rise in the demand for labour will lead to a rise in the equilibrium wage rate.

effect of demand on wages

 

A fall in the supply of labour will result in a rise in the equilibrium wage rate.

effect of fall in supply on wages

Download handout 'labour market graphs'pdf

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